Treasury says no bailout approved for state firms

National Treasury denied that the government has approved a bailout package of R59bn for state-owned companies.

A cabinet meeting “is not a place where budget bids are tabled,” the Treasury said in an emailed response to questions after the Sunday Times reported the rescue plan was discussed at a cabinet meeting convened by President Cyril Ramaphosa last week.

The South African National Roads Agency Ltd (Sanral) would receive a cash injection, while the Post Office (Sapo), South African Airways (SAA) and the South African Broadcasting Corporation (SABC) would get guarantees to allow them to borrow more, the Johannesburg-based newspaper reported.

State firms under the rule of former President Jacob Zuma were plagued with ill governance and financial mismanagement. Government guarantees to state companies stand at more than R450bn, according to data from the National Treasury. The state’s exposure to this increased to 64.5% in the fiscal year to March from 54.4% as companies drew on the guarantees.

Credit-ratings companies have flagged state firms’ finances as a concern in recent years. The Reserve Bank said in April the inability of these companies to roll over debt could threaten the nation’s financial stability and ultimately result in more downgrades after S&P Global Ratings and Fitch Ratings cut their assessments of South African debt to junk last year.

Finance Minister Nhlanhla Nene is scheduled to present his mid-term budget to lawmakers on October 24 and will have to balance increasing spending needs with tax income that’s under pressure in an economy that hasn’t expanded at more than 2% annually since 2013.

Spending bids that have been approved by cabinet will be announced in February or in the adjustments budget in October, the Treasury said.

The cabinet has not yet announced what it discussed or decided at last week’s meeting.

SAA one of the big casualties of state capture – Gordhan

Minister of Public Enterprises Pravin Gordhan has told Parliament that the next four months at SAA will be critical in determining whether the airline can return to its former glory as a national carrier.

Gordhan was speaking to the committee during its meeting with SAA on the airline’s turnaround strategy on Tuesday.

“If someone has misspent money and there is no proof that work was done, those who benefited improperly should have their assets frozen, for a start,” he said.

“Now, applying to courts to have executives declared delinquent is a fairly extensive process. Nonetheless it is part of the remedies we have to look at,” he said.

Gordhan told the committee that the next four months will be critical in determining whether SAA can return to its former glory as a national carrier.

He said of the questions members raised with SAA, many related to state capture.

“Together with our team at the department, we walked through SAA and there is no question that SAA is a casualty of corruption,” Gordhan said.

Gordhan said SAA needed to rebuild its revenue base, manage expenditure and stop leakages for its turnaround strategy to work. He said the company had lost market share, but said the board has “at least stabilised the situation”.

“On the one hand, they have to work with the finance minister and myself to get better access to liquidity of R9.2bn. But they also have to demonstrate that they are improving in attracting revenue. But let us not delude ourselves. Banks require better assurance that we have a plan and the skills to implement it,” he said.

He said it was understandable that outside observers found SAA a hard proposition to buy into after years of mismanagement. However, he said he had the full commitment of the SAA board to back public trust in the company.

SA entrepreneurs get exposure at in China

The South Africa companies and agencies that are exhibiting at the first China International Import Expo (CIIE) in Shanghai have expressed their satisfaction with the responses they are receiving from potential Chinese clients.

The delegation is being funded by the Department of Trade and Industry (dti) through the Export Marketing and Investment Assistance (EMIA) Scheme.

SA’s current export basket to China consist mainly of minerals and raw materials and the CIIE is regarded as an opportunity to showcase the diversity of value-added products SA is able to export to China.

The SA delegation is made up of a mix of well-established companies and export councils representing the agro-processing, engineering, chemicals, rail, infrastructure, consumer goods and ICT sectors. The CIIE event also provided an opportunity to showcase some of SA’s export ready black industrialist companies.

The managing director of North West-based Ditsogo Project, Tebogo Mosito says she is confident that the Chinese market can really open up investment opportunities for them to export their products. Ditsogo Projects is an engineering company offering services such as metal fabrication, manufacturing of rolling stock conveyors structures, hoppers and chutes, and electrical supplies.

“One of the two orders that I received are worth R2m and I managed to secure them within two days,” said Mosito.

She thanked government and the Department of Trade and Industry (dti) for investing in her business by opening up opportunities to trade globally. She added that the dti has enabled her to attend international expos which the company would not have been able to afford.

Elmo Moore of the Paltechnologies, a company that is based in Pretoria, said their participation at the China International Import Expo was hugely beneficial. The Paltechnologies company manufactures, amongst others, single and double eccentric butterfly valves, slurry sleeve valves, non-return valves and swing check valves.

“There has been a lot of interest from agents who want to distribute our products in China. We will also be working with Beijing Axis to set-up an operation in China…We are currently in a process of setting up refurbishment plant in Ghana because the dti took us to an exhibition called Wampex in June this year and that’s has been the end result of that exhibition,” said Moore.

Thulani Nobela of Mpumalanga Economic Growth Agency, indicated that as a province they have also benefitted by participating in the China International Import Expo. According to Nobela, they have received enquiries mainly on citrus fruit, coal and macadamia products and there were a few enquiries about edible oil.

Minister Rob Davies earlier in the week addressed the SA Investment Seminar on the margins of CIIE in Shanghai. He said exhibitions like the CIIE give SA an advantage to display products, goods and services that can be supplied to the Chinese market.

SA to introduce new oil and gas law after 2019 polls

South Africa will introduce new oil and gas laws after elections next year, said Mineral Resources Minister Gwede Mantashe.

“We will make sure that it will be one of the first laws to be processed in the new parliament after the elections,” he said in Cape Town on Thursday.

The process of approval of exploration applications will be completed in terms of the current mineral and petroleum law.

The oil and gas sector must advance black economic empowerment, especially at the operational level, he said.

Population growth set to erase SA’s per capita GDP gains in 2019 – S&P

SA’s population growth is set to largely erase any per capita GDP gains in 2019, according to ratings agency S&P Global.

The global ratings agency, which on Friday kept SA’s sovereign rand and dollar-denominated credit ratings unchanged* at sub-investment grade, was commenting on the state of SA’s economy.

According to Stats SA’s mid-year population estimates for 2018, the country’s current population growth rate is around 1.5% per year.

But S&P is only estimating a GDP growth rate of 0.8% for 2018, slightly higher than the SA Reserve Bank’s latest estimate of 0.6%.

In 2019 and 2020, when both S&P and the central bank expect economic growth rates to pick up to near 2%, per capita GDP increases will largely be cancelled out by population growth, with S&P forecasting growth of “close to 0%”.

“We estimate that among the 20 major emerging markets, only Qatar, Argentina, and Venezuela will show slower per capita growth,” the ratings agency said.

* S&P affirmed SA’s long-term local currency debt at BB+, the first notch of sub-investment grade. It kept the country’s long-term foreign currency rating at BB, two notches below investment grade.